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Samsung misses Q2 forecasts; low-end phone competition a culprit

  • Samsung (SSNLF, SSNGY) expects to report Q2 revenue of KRW51T-53T ($50.4B-$52.4B), and an op. profit of KRW7T-7.4T ($6.9B-$7.3B). Those guidance ranges are below Bloomberg consensus estimates of KRW53.2T and KRW8.1T.
  • The electronics giant blames "mid-to-low end" phone competition in China and Europe, a strong won, and higher marketing spend aimed at lowering phone inventories.
  • Also, tablet shipments fell more than expected due to a weak market, and mobile weakness had a spillover effect on internal display and chip sales.
  • Samsung is facing intensifying low-end/mid-range smartphone competition from Chinese OEMs pricing aggressively - its smartphone share fell Y/Y in both Q1 and Q4 (per IDC) following a long run of share gains, while Huawei and Lenovo each grew rapidly. Xiaomi, which shipped 26.1M phones in 1H14 (+271% Y/Y), is also a growing threat.
  • The tablet weakness comes after the market's growth slowed to a trickle in Q1. Notably, Samsung states phablets are cannibalizing 7"-8" tablets, and a lack of carrier subsidies is leading to low upgrade rates (previous).
  • Samsung is "cautiously" optimistic about Q3. It expects hardware refreshes to boost smartphone sales, and for display and memory chip sales to also rise.
  • Shares are up 0.5% in Seoul. Investors have been expecting soft Q2 numbers.
Comments (1)
  • Jack Baker
    , contributor
    Comments (886) | Send Message
     
    Next quarter will be a disaster for Samsung. The two larger iPhones will decimate them at the high-end and the Chinese OEM's will continue to take market share in the low and middle market. Back to selling TV's and refrigerators for Samsung.
    8 Jul, 08:11 AM Reply Like
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